TIDMVJBA 
 
 
 
   Nasdaq Copenhagen A/S 
 
 
 
 
 
   13 May 2020 
 
   Q1 2020 Highlights 
 
   Vestjysk Bank reported a profit after tax of DKK 57 million in Q1 2020. 
The reported profit was adversely affected by the impact of the Corona 
crisis on the financial markets as well as on impairment provisions. The 
Bank increased impairment provisions by DKK 50 million. The Bank has 
made a total impairment provision of DKK 100 million for economic 
uncertainty, corresponding to 1% of the Bank's loans and advances. 
 
 
   -- Profit after tax was DKK 57 million (Q1 2019: DKK 72 million), for an 
      annualised return on equity after tax of 7.7%. 
 
   -- Core income of DKK 198 million (Q1 2019: DKK 221 million). 
 
   -- Negative market value adjustments of DKK 4 million (Q1 2019: positive 
      value adjustments of DKK 20 million). 
 
   -- Cost ratio of 63.7% (Q1 2019: 55.8%). 
 
   -- Core earnings before impairment allowances of DKK 72 million (Q1 2019: 
      DKK 98 million). 
 
   -- Impairment of loans and receivables, etc. of DKK 12 million (Q1 2019: DKK 
      22 million). Impairment allowances on agriculture amounted to a net 
      reversal for the quarter. 
 
   -- The Bank's capital requirements were 13.0%, consisting of an individual 
      solvency need of 10.5%, a general capital conservation buffer of 2.5% and 
      a countercyclical buffer of 0.0%. The MREL was phased in at 1.875%, added 
      to the capital requirement. The individual solvency need includes DKK 50 
      million, or 0.37 of a percentage point, based on a management estimate of 
      economic uncertainty. 
 
   -- The Bank's total capital ratio was 22.1, implying an excess cover of 9.1 
      percentage points or DKK 1,230 million. 
 
   -- The Bank's MREL ratio was 22.1. This taken into account, the excess cover 
      was 7.2 percentage points, or DKK 975 million. 
 
   Preliminary impact of the Corona crisis on Vestjysk Bank 
 
   Like the rest of Denmark, the Bank has been impacted by the official 
lockdown of our society since 12 March 2020. The vast majority of the 
Bank's employees have been working from home, and the Bank's branches 
were closed for business until 27 April 2020. During this period, the 
Bank was able to maintain a reasonable level of operations, and the 
level of customer activity has been normal. 
 
   The Bank's advisers have proactively contacted all business customers to 
arrange how the Bank can help them through the Corona crisis and to 
advise them on how to apply the rescue packages provided by the Danish 
government and parliament. To date, the crisis has not directly impacted 
the Bank's lending or impairment allowances to any significant extent. 
This is expected to change over time, however, if the crisis persists 
through the coming months. 
 
   For retail customers, Vestjysk Bank has provided a range of borrowing 
facilities in the form of permission to skip instalments, temporary 
overdraft facilities and increased credit facilities to support 
customers hit by the lockdown.  These measures for retail customers have 
also had a limited effect on the Bank. 
 
   The sector distribution of the Bank's lending plays a positive part in 
this. Most of the Bank's lending is within sectors that have not been 
adversely affected by the Corona crisis so far. At this point, the hotel, 
restaurant, transport and retail sectors are the hardest hit, and these 
sectors account for some 10% of the Bank's total lending. 
 
   Vestjysk Bank's two main sectors, agriculture and real estate, have so 
far been relatively unaffected by the Corona crisis. Until now, pig and 
dairy farmers have not been hit by the crisis, and although pork 
settlement prices dropped towards the end of the period, they are still 
at a high level. The high pork prices have enabled customers, some of 
which are credit-impaired, to repay debt to the Bank. This resulted in 
reversals of impairment allowances within this sector in Q1 2020. We 
expect this development to continue, but if the price level starts to 
fall, it could have an adverse effect on the Bank. Agriculture still 
faces risk factors such as an outbreak of African swine fever in Germany 
and/or in Denmark and a potential adverse impact of Britain's exit from 
the EU (Brexit). 
 
   In the real estate sector, we are so far seeing an effect on commercial 
leases in the affected sectors, where agreements have been made to defer 
rent payments. Depending on the duration and depth of the crisis, this 
effect could widen. So far, private residential rentals have not been 
affected, and this is not expected to change significantly. 
 
   Our retail customers are generally doing well and are in a strong 
position to withstand the consequences of the Corona crisis. In the long 
term, we expect to see an increase in impairment allowances, but on a 
manageable level overall. 
 
   The situation is expected to change over the coming weeks and months. 
The Bank forecasts that the negative impact will spread to a wider range 
of sectors and that some of the Bank's retail customers may be affected 
by unemployment, for example. 
 
   The Bank's DKK 100 million impairment provisions due to economic 
uncertainty and DKK 50 million capital reservation in the individual 
solvency need are expected to be sufficient to cover the Bank's current 
risk exposure. Projections about the future consequences of the Corona 
crisis are subject to considerable uncertainty. In particular, the 
above-mentioned potential risks to pig farmers could lead to an increase 
in impairment allowances. 
 
   Outlook for 2020 
 
   At 25 March 2020, Vestjysk Bank suspended its 2020 profit guidance due 
to the unforeseeable effects of the Corona crisis. The Bank has prepared 
a new 2020 profit forecast based on the current economic outlook. As it 
is entirely dependent on the duration and depth of the Corona crisis, 
the forecast is subject to considerable uncertainty. With this 
qualification, the Bank guides a profit after tax of DKK 160-240 million, 
as compared with the previous guidance of DKK 250-300 million. 
 
   In addition to the ongoing Corona crisis, we also face uncertainties 
relating to the global economy and, in particular, agricultural 
settlement prices. As mentioned, any major adverse development in these 
could impact the Bank's impairment allowances. 
 
   Enquiries 
 
   Please address any enquiries regarding the present announcement to Jan 
Ulsø Madsen, CEO, at tel. (+45) 96 63 21 04. 
 
   Vestjysk Bank A/S 
 
 
 
 
 
 
 
   Kim Duus                                        Jan Ulsø Madsen 
 
   Chairman                                       CEO 
 
 
 
 
 
 
 
   Vestjysk Bank A/S 
 
   Torvet 4-5 
 
   7620 Lemvig 
 
   Tel. (+45) 96 63 20 00 
 
 
 
   CVR no. 34 63 13 28 
 
   www.vestjyskbank.dk 
 
   Attachment 
 
 
   -- Vestjysk Bank 1 Q 2020 
      https://ml-eu.globenewswire.com/Resource/Download/8bffff49-00b6-47bd-83f1-868e54ac08e7 
 
 
 
 
 
 
 

(END) Dow Jones Newswires

May 13, 2020 02:30 ET (06:30 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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